‘Why Nations Fail’

In response to:

Jared Diamond provides an engaging review of our book Why Nations Fail [NYR, June 7]. Though Diamond accepts the importance of institutions and their political roots—the main focus of our book—and asserts that “perhaps they provide 50 percent of the explanation for national differences in prosperity,” his review is mostly concerned with defending an alternative perspective, which we have called the geography hypothesis. There is no surprise in this as Diamond is the most erudite and original proponent of this hypothesis, and our book dismisses it.

Diamond adds to his original thesis about the timing of the Neolithic Revolution shaping the patterns of intercontinental inequality claims that have more recently been articulated by economist Jeffrey Sachs on how tropical areas are condemned to poverty because of their greater disease burden and their poor soil quality, and how topography and natural resources are crucial determinants of prosperity. He also criticizes our book for not sufficiently grounding institutional dynamics within the geographic context—not explaining which types of natural resources are a curse and not linking institutional variation to geographic factors. Finally, he is critical of our discussion of the Neolithic Revolution. However, in each of these cases, Diamond does not do justice to our argument.

First, contrary to Diamond’s claim, there is nothing that contradicts tropical medicine and agricultural science in claiming that these are not major factors shaping differences in national prosperity. That these geographic factors cannot by themselves account for prosperity is illustrated by an empirical pattern we discuss—the “reversal of fortune.” Among the countries colonized by Europeans, those that were more prosperous before colonization ended up as relatively less prosperous today. This is prima facie evidence that, at least in the sample that makes up almost half of the countries in the world, geographic factors cannot account—while institutional ones can—for differences in prosperity as these factors haven’t changed, while fortunes have. Academic research also shows that once the effect of institutions is properly controlled for, there is no evidence that geographic factors have a significant impact on prosperity today.

Similarly, major improvements in health technology starting in the 1940s have made significant headway against diseases and have led to unparalleled increases in life expectancy in many parts of the world. But they have not led to faster growth in these areas over the last sixty years in contrast to what would have been expected if the disease burden were a crucial determinant of prosperity.

Second, though Diamond criticizes us for not explaining “which resources especially lend themselves to the curse,” it is not characteristics of a natural resource but the institutions that determine whether it is a curse or a blessing—diamonds are a curse for Sierra Leone and Angola, and a blessing for Botswana.

Third, Diamond claims that our revisionist take on the Neolithic Revolution, based on the idea that sedentary life and social complexity came before farming, suffers from a “complete absence of evidence” when in fact it is now the conventional wisdom amongst archaeologists. He also claims that the Fertile Crescent was the “only area in which local agriculture could have arisen” because of the presence of various species of wheat, even though agriculture originated in many places, for example in China, based not on wheat but rice. More importantly, however, our point was that once one examines the distribution of domesticable plants and animals more broadly, Diamond’s theory predicts that the Neolithic Revolution would happen first in Eurasia, but cannot account for differences in prosperity today, which are huge within Eurasia and not explained by the timing of the Neolithic Revolution (as recent research by Ola Olsson and Christopher Paik shows).

Fourth, Diamond suggests that, by eschewing geographic determinism, our theory is as if institutions appeared “randomly.” This is not a fair characterization. Though at times the process of institutional development has been influenced by geography or disease ecology (as our own academic research joint with Simon Johnson has documented), these are not the major factors shaping institutional variation today. But this does not mean that institutional dynamics are simply random; our book explains how institutional variation today is largely a systematic outcome of historical processes, and how these processes can be studied, revealing, for example, why Europe, the United States, and Australia are richer than the Middle East, Africa, and Latin America.

Daron Acemoglu
James A. Robinson
Cambridge, Massachusetts

Jared Diamond replies:

My review praised Daron Acemoglu and James Robinson for writing a wonderful book about the role of institutions in shaping why countries are rich or poor. The book’s limitations, repeated now in their letter, are that they dismiss the roles of all other factors, especially geographic factors. That’s because of their oversimplified view of geography’s effects; their criticizing the straw man that geography explains everything (it doesn’t, and it’s not an alternative perspective but an additional perspective); and their failure to explain the origins of good institutions themselves.

The first point of their four-point letter is that tropical medicine and agricultural science aren’t major factors shaping national differences in prosperity. But the reasons why those are indeed major factors are obvious and well known. Tropical diseases cause a skilled worker, who completes professional training by age thirty, to look forward to, on the average, just ten years of economic productivity in Zambia before dying at an average life span of around forty, but to be economically productive for thirty-five years until retiring at age sixty-five in the US, Europe, and Japan (average life span around eighty). Even while they are still alive, workers in the tropics are often sick and unable to work. Women in the tropics face big obstacles in entering the workforce, because of having to care for their sick babies, or being pregnant with or nursing babies to replace previous babies likely to die or already dead. That’s why economists other than Acemoglu and Robinson do find a significant effect of geographic factors on prosperity today, after properly controlling for the effect of institutions.

Second, Acemoglu and Robinson deny that characteristics of a natural resource determine whether it’s a curse or a blessing. But characteristics of diamonds and oil notoriously promote corruption and civil wars more than do characteristics of iron and timber.

Third, geography has had a big effect on modern prosperity through permitting local ancient origins of agriculture, in turn permitting sedentary life and social complexity. While sedentary life and social complexity did develop before farming in a few exceptional cases, Acemoglu and Robinson’s assertion that as a generalization it is conventional wisdom among archaeologists will be news to archaeologists. Acemoglu and Robinson misquote me in saying that I claim the Fertile Crescent to have been the only area where local agriculture could have arisen. Of course not: instead, I cited agricultural historians who showed that the Fertile Crescent was the only such area in western Eurasia; my book Guns, Germs, and Steel discussed at length how local agriculture also arose in at least eight areas outside western Eurasia. Acemoglu and Robinson are correct that the timing of the Neolithic Revolution doesn’t account for prosperity differences within Eurasia today; it “merely” accounts for about half of prosperity differences today around the world as a whole.

Finally, as readers may quickly confirm for themselves, it is indeed a fair characterization of Acemoglu and Robinson’s book to say that their theory is as if institutions appeared at random. Although their letter describes institutional variation today as a systematic outcome of historical processes, much of their book is actually devoted to relating story after story purportedly explaining how institutional variation developed unsystematically and at random, as a result of particular events happening in particular places at critical junctures.

To summarize, I agree with Acemoglu and Robinson that institutions are important. If they had said that, they would have written a completely wonderful book in which I would have found nothing to criticize. Unfortunately, they overstated their case and dismissed the roles of factors other than institutions. I continue to recommend their book as a sparkling account of the role of institutions. I hope that their next book will be an equally sparkling one, about the roles of those other factors.